### Cryptocurrency Regulation in the United States

#### Overview

Cryptocurrency, a type of digital or virtual currency that uses cryptography for security, has been the subject of increasing attention and scrutiny by various regulatory bodies in the United States. The legal stance on cryptocurrencies such as Bitcoin, Ethereum, and others has evolved significantly since the rise of Bitcoin in 2009. The United States has not implemented a uniform legal framework at the federal level for the regulation of cryptocurrencies; instead, the handling of these digital assets falls under various regulatory agencies, including the Internal Revenue Service (IRS) and the Securities and Exchange Commission (SEC), among others. Each agency applies different definitions and regulations based on their respective mandates and the aspect of cryptocurrency they are examining.

#### IRS and Taxation of Cryptocurrencies

In 2014, the IRS issued guidance regarding the taxation of virtual currencies, marking a significant component of cryptocurrency regulation in the United States. According to IRS Notice 2014-21, cryptocurrencies such as Bitcoin are treated as property for federal income tax purposes. This classification implies that general tax principles applicable to property transactions also apply to transactions using virtual currency.

Consequences of this IRS ruling include:
1. **Capital Gains Tax**: Individuals and businesses that buy and sell cryptocurrencies are required to calculate gains or losses on their transactions, which are treated as capital gains or losses. This means that cryptocurrencies are taxed similarly to other forms of property like stocks or real-estate.
2. **Income Reporting**: If an individual receives payment in cryptocurrencies for goods or services, this must be included in their gross income at the fair market value of the cryptocurrency at the time it was received. This value is then subject to income taxes.
3. **Reporting Requirements**: The disposition of any cryptocurrency holdings and any capital gains or losses must be reported on one's tax returns, similar to other forms of property.

This approach treats Bitcoin and other cryptocurrencies more like investment vehicles rather than currency in a traditional sense. People holding cryptocurrencies are responsible for keeping records of their transactions and reporting them to the IRS.

#### SEC and Cryptocurrency as Securities

The SEC, responsible for protecting investors and maintaining fair and orderly functioning of the securities markets, has been actively involved in regulating cryptocurrencies, especially considering the rising trend of Initial Coin Offerings (ICOs) and token sales. However, the SEC does not explicitly classify all cryptocurrencies as securities. Instead, the determination is made on a case-by-case basis depending on the characteristics of the particular cryptocurrency and the manner in which it is offered, sold, or exchanged.

The SEC has indicated that most ICOs qualify as securities offerings and thus must adhere to federal securities laws. This classification primarily focuses on whether a cryptocurrency functions more like a traditional security, where there is an expectation of profit derived from the efforts of others. This stance was further elaborated in the SEC’s 2017 DAO Report, where the findings from the investigation of a decentralized autonomous organization (DAO) concluded that certain tokens issued by the DAO constituted securities.

However, major cryptocurrencies like Bitcoin and Ethereum are generally not treated as securities by the SEC. In June 2018, the SEC's Director of Corporate Finance clarified that Ethereum does not exhibit the properties of a security under U.S. law, largely due to its decentralized structure.

#### Conclusion

Cryptocurrency regulation in the United States is complex and multisectoral, shaped by different interpretations and rules from various federal agencies. While the IRS treats cryptocurrencies as taxable property, the SEC navigates its classification based on the specifics of each ICO and the operational characteristics of each token or cryptocurrency, not universally recognizing digital currencies as exchangeable commodities or assets. The evolving nature of both the technology and the regulatory responses ensures that the legal landscape for cryptocurrencies in the U.S. is continuously developing.